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Renewable energy’s relentless cost declines make solar and wind the cheapest and largest source of new electricity generation in many countries, including the world’s fastest-growing nations. But while cheap renewable energy means “coal strikes out,” reducing emissions enough to avoid dangerous climate change requires comprehensive policy action, according to the International Energy Agency’s (IEA) World Energy Outlook 2017.

IEA reports the average cost of electricity from solar photovoltaics (PV) dropped 70% from 2010 to 2016, and the average cost of power from wind farms declined 25% over the same period. IEA expects renewable energy will secure around $7 trillion in investment by 2040, and even though electricity demand is forecast to grow 60%, power sector emissions will only increase 5%

But despite IEA’s positive outlook for renewables, global emissions could still increase due to increased petroleum use in transportation and higher industrial emissions, which could raise temperatures a dangerous 3 degrees Celsius by 2100.

IEA’s “New Policies Scenario” aggregates all existing and announced global energy policies with all international Paris Agreement commitments. In this scenario, global energy needs rise 30% between 2017 and 2040 – the equivalent of adding another China and India – with two-thirds coming from developing countries in Asia.

Clean energy costs are falling just in time to meet this rising demand. IEA forecasts renewable energy will supply increased primary energy demand by 2040, adding 75 gigawatts (GW) of solar PV and 50 GW of wind annually. As a result, in IEA’s outlook, renewables account for 80% of new capacity additions in Europe and more than 75% of new capacity additions in China through 2040.

Energy efficiency improvements will also help blunt projected increases in energy demand by more than 50% and renewable energy will chip in by reducing non-generation emissions – renewables' share of final energy consumption will nearly double from 9% to 16% by 2040, led by expanded direct use in heating and mobility worldwide.

This transformation is based on economics, not subsidies. IEA reports new wind installations are already cheaper than new natural gas generation in India and China, and cost parity for solar PV is within reach. The new paradigm is most important in developing nations, where consumers will add millions of appliances, electric vehicles, air conditioners, and heaters as incomes rise – for context, by 2040 electricity demand for cooling in China will exceed total electricity demand in Japan today.

IEA notes “in the absence of large-scale carbon capture and storage (CCS), global coal consumption flatlines,” and that equation is unlikely to change. CCS is already two to three times more expensive than wind or solar, requires roughly $80 in subsidies per megawatt-hour to be competitive with solar, and only two CCS projects capturing coal-fired power plant emissions exist worldwide.

Even with coal beyond resuscitation in global electricity generation, the world’s climate outlook is still dire under IEA’s New Policies Scenario. Global emissions are still forecast to increase 5% by 2040 due to increased petroleum use in transportation and rising industrial emissions – putting global warming on a dangerous track.